Budget flexibility eludes KU

‘Block grants’ not aiding finances, legislators told

Topeka  Four years ago, Kansas University officials cheered when state leaders agreed they would provide public universities with a "block grant" in the annual budgeting process.

But on Monday, KU and other higher education officials told lawmakers further changes were needed.

"The problem is just as the block grant was established, the state's budget crisis descended," KU Chancellor Robert Hemenway told the Legislative Budget Committee.

Sen. Steve Morris, chairman of the budget panel, said changes probably were in order.

"This certainly is a work in progress," the Hugoton Republican said.

The issue is the finance method established in 2001, providing state universities operating grants and allowing the schools greater flexibility managing their own budgets and tuition.

Previously, Kansas financed universities through a complicated formula that provided a higher percentage of state funding to schools with relatively low levels of tuition income.

Under the old system, large schools such as KU were at a disadvantage and successfully lobbied for the change to a block grant appropriation.

But the change came just as state revenue spiraled downward in the recession that began after the 9-11 terrorist attacks.

For three fiscal years, universities received either flat or reduced block grants, then were forced to pay for state-mandated pay raises and extra health insurance costs without any help from the state.

"In several respects, the universities have been subjected to the worst of two budgetary worlds," said Marvin Burris, vice president for finance and administration for the Kansas Board of Regents.

In providing block grants, the state also has allowed the universities greater leeway in setting tuition rates. But with revenue tight, the tuition increases have been used to make up for a lack of state funding.

The situation has harmed schools such as the KU Medical Center and Kansas State University Extension Systems and Agriculture Research Programs, officials said. That is because those schools receive a much lower percentage of funding from tuition.

"The regents and Legislature have to find a way to fund something as unique and critical as the Kansas University Medical Center," Hemenway said.

One proposal being considered by the regents is to provide an extra increase to the block grant to specifically address schools that can't generate large amounts of tuition.

Gov. Kathleen Sebelius' budget director Duane Goossen and several lawmakers on the committee said some changes probably were needed in the block grant program.

"All in all, it hasn't worked out in its purest, purest form. But in total, as I reflect, the grant has been successful," Goossen said.